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Low GHG Strategy IO Model for Mexico

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Low GHG Strategy IO Model for Mexico
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    LOW CARBON DEVELOPMENT STRATEGY FOR MEXICO: AN INPUT-OUTPUT ANALYSIS Final Report Pablo Ruiz Nápoles February, 2012  Low Carbon Strategy for Mexico: I-O Model. Final Report   ii This report was prepared by Dr Pablo Ruiz Nápoles, Faculty of Economics, National Autonomous University of Mexico (UNAM) at the request of the Mexican Ministry of Environment and Natural Resources (SEMARNAT). Technical support was provided by the United Nations Environment Programme (UNEP) and the French Agency for Development (AFD). The finding, interpretations, and conclusions expressed in this report are entirely those of the author and should not be attributed in any manner to UNEP and AFD. UNEP and AFD do not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequences of their use. This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made. UNEP would appreciate receiving a copy of any  publication that uses this publication as a source.  No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the United Nations Environment Programme. Financial support was generously provided by the government of Norway and France.  Low Carbon Strategy for Mexico: I-O Model. Final Report   iii Acknowledgements The author of this study wishes to express his gratitude to his colleagues Martín Puchet and Valentín Solís, for their modelling advice, to Rosa Gómez, Javier Castañeda, Eduardo Moreno and Fernando Pineda, students at UNAM, for their technical assistantship. Special thanks to Terry Barker, Annela Anger, Douglas Crowford and Serban Scrieciu members of the Cambridge Centre for Climate Change Mitigation Research (4CMR) for their valuable comments, thanks also to Carl Bernadac and an anonymous reviewer, both from the French Agency for Development (AFD) and at last but not least to Noriko Yamada from the United Nations Environment Programme (UNEP).  Low Carbon Strategy for Mexico: I-O Model. Final Report   iv C ONTENTS   I. Introduction ........................................................................................................................ 1 II. Review of selected literature ............................................................................................. 4 1. Climate change, causes and mitigation policies ............................................................. 4 2. Policy instruments and economic models ...................................................................... 5 3. General Equilibrium models ........................................................................................... 6 4. Econometric models ..................................................................................................... 15 5. Applied Environmental Input-Output models .............................................................. 16 III. A Comparison Mexico-Canada ..................................................................................... 22 1. Method for estimating comparison indicators .............................................................. 22 2. Estimation results ......................................................................................................... 23 IV. GHG emissions and strategic sectors in the Mexican economy ................................... 27 1. Strategic or Key economic sectors ............................................................................... 27 2. Main IOM sectors emitting GHG ................................................................................. 34 3. Key and High Pollutant sectors .................................................................................... 36 V. Environment Input-Output Model for Mexico ............................................................... 38 1. Environment Input-Output models ............................................................................... 38 2. Pollution abatement and Technological change models............................................... 39 3. Objectives of the Mexican EIO Model ......................................................................... 41 4. The model and the scenarios ........................................................................................ 42 VI. Technology changes and GHG emissions reduction: the model results ....................... 46 1. Base line or “Business as Usual” 2008 to 2020  ........................................................... 46 2. Introduction of technological changes and reductions of GHG emissions ........................ 48 3. Changes in GHG emissions by sector ................................................................................ 50 4. Technical change and output growth .................................................................................. 52 5. The Costs of Pollution model ............................................................................................. 53 VII. Summary, Conclusions and Policy recommendations ................................................. 54 1. Summary and Conclusions ........................................................................................... 54 2. Lessons from the policy debates ................................................................................... 59 3. Policy recommendations derived from this study ........................................................ 62 4. Further research ............................................................................................................ 63 Bibliography ........................................................................................................................ 64    Low Carbon Strategy for Mexico: I-O Model. Final Report   v L IST OF T ABLES AND G RAPHS  Tables Table 1 Canada GGH Emissions and GHG reduction expenses ......................................... 25 Table 2 Mexico GHG Emissions and Estimated Reduction Costs ...................................... 26 Table 3 North American Industrial Classification System, Input-Output Industry Classification ....................................................................................................................... 28 Table 4 23 Selected Industries of the 2008 I-O Matrix of Mexico, Backward and Forward Linkages Rasmussen Method................................................................................ 31 Table 5 23 Selected Industries of the 2008 I-O Matrix of Mexico, Backward and Forward Linkages Impacts by Extraction Method .............................................................. 33 Table 6 GHG Emissions by Sector in Mexico 2008, Selected Industries ........................... 35 Table 7 Main GHG Emissions Coefficients by Sector in Mexico 2008 ............................. 36 Table 8 Mexico Estimated GHG Emissions Trajectories .................................................... 37 Table 9 Mexico Estimated GHG Emissions with Technical Change .................................. 49 Table 10 Estimates of GHG emissions variations 2008-2020 by sector in Selected Industries ............................................................................................................... 51 Table 11 Estimated Gross Output 2008-2020 ..................................................................... 52 Table 12 Estimated Gross Output and Pollution Costs for 2015 ......................................... 55 Graphs Graph 1 Mexico: GHG Emissions BAU 2008-2020 ........................................................... 47 Graph 2 Mexico: GHG Emissions without and with technological change, 2008-2020 .... 50 Graph 3 Mexico: Gross Output without and with technological change, 2008-2020 ......... 53
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